(Adds guidance, CEO comment, background) Aug 23 (Reuters) -...

(Adds guidance, CEO comment, background)

Aug 23 (Reuters) - Santos Ltd (STO) , Australia's second-largest independent gas producer, reported on Thursday a near doubling in first-half underlying profit and revived its dividend, scrapped more than two years ago, after slashing debt.

Underlying profit for the half-year ended June 30 rose to $217 million from $109 million a year earlier, beating a forecast of $189 million from Royal Bank of Canada.

Santos declared an interim dividend of $0.035 a share. It suspended dividends in 2016, diverting cash to pay down debt which peaked for the construction of its Gladstone liquefied natural gas (LNG) project just as oil prices collapsed.

The turnaround in fortunes followed Santos' rejection in May of a $10.8 billion takeover offer from private equity-backed Harbour Energy, with the board having bet instead on the company's growth strategy in Australia and Papua New Guinea.

"We will shortly achieve our net debt reduction target, more than a year ahead of schedule, and therefore have a significantly stronger balance sheet to support our growth strategy," Chief Executive Officer Kevin Gallagher said in a statement.

Santos agreed on Wednesday to buy Quadrant Energy for $2.15 billion and gain access to what may be the biggest oil find off Western Australia in over two decades.

Santos cut net debt to $2.44 billion in the first half, in line with its plan to reduce net debt to below $2 billion by the end of 2018, thanks to sharp cost-cutting and a rebound in oil and gas prices.

The company maintained its 2018 production of 55-58 million barrels of oil on growing output from its Cooper Basin assets. Santos said this month a fourth gas rig had started operations at the site in South Australia.

Production in the first half was hurt by a six-week outage at the PNG LNG operation, run by ExxonMobil Corp XOM.N , following an earthquake in Papua New Guinea's rugged highlands.

The company also maintained its 2018 sales volume guidance of 72-76 mmboe.